Big Name Tech IPOs This Year Continue to Slip Well Below IPO Price

Written by: Jay Yi, MBA; Edited by: Chris Thompson, CFA, MBA, P.Eng

 eResearch | According to EY’s Global IPO Market report for Q1/2019 and Q2/2010, only 19 companies raised capital on the NASDAQ through initial public offerings (“IPOs”) in Q1/2019, but it was followed by a frenzy of IPOs in Q2/2019 as 48 companies raised an aggregate of US$25 billion on the NASDAQ, the most capital raised during a single quarter in five years and the greatest number of deals during a single quarter in four years.

Technology companies led with the greatest number of IPOs this year, but many investors are losing confidence as share prices are falling since these companies do not expect profits anytime soon.

As illustrated in Chart 1 that shows the performance of these five companies this year (Fiverr, Lyft, Pinterest, Slack, and Uber), Lyft and Fiverr had great opening days up 24.6% and 42.4%, respectively, but the others failed to close higher on their first days of trading. Pinterest is the only company of the five that is trading higher than its IPO, up only 5.5%, and Slack has dropped the most, down 36.6% from its IPO.

Chart 1: IPO Percentage Gains for Fiverr, Lyft, Pinterest, Slack, and Uber

Below is an overview of the these popular tech companies within the gig economy and social media industry.

1. Gig Economy

Fiverr International Ltd. (NYSE: FVRR) – 06/13/2019

• • • • Fiverr is a marketplace platform that connects freelancers with customers and is supporting projects such as web development and design, which are needed for the growing number of startups.
      • Fiverr opened its first day of trading at US$21 per share with a US$800 million valuation and is currently trading at US$19.20 per share, down 8% since IPO, with a market capitalization of US$595 million.
      • In 2018, Fiverr reported US$75.5 million in revenue, a 45% increase year-over-year, but net losses of US$36.1 million, an 87% increase year-over-year.

Uber Technologies Inc. (NYSE: UBER; LSE: 0A1U; DB: UT8) – 5/10/2019

• • • • Uber is the first international ride-share company with first mover advantages, but its share price continues to decline due to constant reports of losses, growing competition from Lyft, and a recently passed bill from California targeting them.
      • Uber opened its first day of trading at US$45 per share with a US$82.4 billion valuation and is currently trading at US$33.24 per share, down 26% since IPO, with a market capitalization of US$56.4 billion.
      • In 2018, Uber reported revenues of US$11.3 billion, a 43% increase year-over-year, but net losses of US$1.8 billion, an 18% decrease year-over-year.

Lyft Inc. (NASDAQ: LYFT; DB: LY0) – 3/29/2019

• • • • Lyft was the first ride-share company to list publicly and was the first tech unicorn of 2019. It is struggling as it does not have a competitive advantage over Uber and is constantly growing losses.
      • Lyft opened its first day of trading at US$72 per share with a US$24 billion valuation and is currently trading at US$46.47, down 35% since IPO, with a market capitalization of US$13.6 billion.
      • In 2018, Lyft reported US$2.2 billion in revenue, a 120% increase year-over-year, but net losses of US$911 million, a 32% increase year-over-year.

2. Social Media

Slack Technologies (NYSE: WORK) – 6/20/2019

• • • • Slack is a workplace productivity focused tech company who has created a platform supporting internal communications within a business, with capabilities to easily integrate any APIs from ERP and CRM platforms.
      • Slack opened its first day of trading at US$26 with a US$15.7 billion valuation, and currently trades at US$24.90, down 4% since IPO, with a market capitalization of US$13.5 billion.
      • In 2018, Slack reported revenues of US$220.5 million, a 109% increase year-over-year, but net losses of US$180 million, a 23% increase year-over-year.

Pinterest Inc. (NYSE: PINS) – 4/18/2019

• • • • Pinterest is an online scrapbook platform in which users share content based on themes, which is attractive for advertisers as users can be targeted based on the content they post and share.
      • It opened its first day of trading at US$19 with a US$10 billion valuation, and currently trades at US$29.05, a 52% increase since IPO, with a market capitalization of US$15.7 billion.
      • In 2018, Pinterest reported revenues of US$755.9 million, a 60% increase year-over-year, and net losses of US$63 million, a 106% decrease year-over-year.

As tech companies constantly get criticized for lack of profitability, it is causing new tech IPOs to struggle. It will be interesting to see how tech companies who are planning to IPO in H2/2019 fare.

Here is a list of potential IPOs in H2/2019:

Listed in order: WeWork, Airbnb, Postmates, Peloton, Robinhood, Impossible Foods, Bumble, Palantir, Cloudflare, and Insidesales.com.

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